Minimal Quantile Functions Subject to Stochastic Dominance Constraints
Probability
2022-08-02 v2 Mathematical Finance
Risk Management
Abstract
We consider a problem of finding an SSD (second-order stochastic dominance)-minimal quantile function subject to the mixture of FSD (first-order stochastic dominance) and SSD constraints. The SSD-minimal solution is explicitly worked out and has a close relation to the Skorokhod problem. This result is then applied to explicitly solve a risk minimizing problem in financial economics.
Cite
@article{arxiv.2008.02420,
title = {Minimal Quantile Functions Subject to Stochastic Dominance Constraints},
author = {Xiangyu Wang and Jianming Xia and Zuo Quan Xu and Zhou Yang},
journal= {arXiv preprint arXiv:2008.02420},
year = {2022}
}